China - Largest Supplier Of Renewable Energy Resources

China remains the world’s largest supplier and largest market for renewable energy sources. Over the next twenty years, more solar, wind, and hydro power capacity will be installed than in any other country.

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Definition / Scope

By year 2006, aside the UnitedStates, China was the second largest energyconsumer, utilizing 73.808 quadrillion Btu’s (Quads), which double its consumption in 2000. Every 8 years, China’s economic engine doubles its energy demand. The country’s total generating capacity includes coal, nuclear, natural gas, petroleum, hydroelectric, and non-hydroelectric renewable means.

In tandem with its energy consumption; while the amount of renewable sources rises steadily, the consumption of coal and oil as sources of electricity is still on the increase and is estimated to account for roughly 80% of energy generation by year 2030. While China still depends on coal to generate about two-thirds of all its primary energy, it has in recent times progressively encouraged renewable alternative sources, such as wind, hydro, solar energy and biomass power.

China remains the world’s largest supplier and market for renewable energy sources. Over the next twenty years, more solar, wind, and hydro power capacity will be installed than in any other country.

The percentage of renewable in China’s energy mix was about 13% in 2010, an estimated 6% traditional use of biomass, and 7% modern renewable inclusive. Hydroelectricity (3.4%) and solar (1.5%) accounted for the modern renewable energy used in China. In year 2013, China renewable energy capacity surpassed that of all Europe and the rest of the Asia Pacific region.

The major propellers for this are the increasing cost-competitiveness of renewable energy sources and other advantages which include increased energysecurity and reduced air pollution. With the current policies and investment plans, the quota of modern renewable technology in China’s energy mix will increase to 16% by year 2030. Despite substantial market increase, the Chinese renewable energymarket in light of IP violations might be especially difficult for exporters to enter successfully.

Market Overview

China remains the world's foremost renewable energy producer, utilizing an installed capacity of approximately 152 GW. In recent years, the country has been investing heavily in the renewable energy sector. In year 2007, the sum total investments on renewable energy amounted to $12 billion USD, second only to Germany. In year 2012, China invested a total $65.1 billion USD in pure energy, 30% of the investment by the G-20, with 25% ($31.2 billion USD) of world solar energy investment, another 37% percent ($27.2 billion USD) of global wind energy investment, and 47% ($6.3 billion USD) of global investment in other renewable energy such as small hydro, geothermal and marine; 23 GW of pure energy capacity was installed.[1]

China is recognized as the largest manufacturer of wind turbines and solar energy panels. Roughly about 7% of China's total energy was from renewable means in 2006, and hydropower remains the major renewable energysource in China. In 2009, China’s total hydroelectric output was 615.64 TWh, making up 16.6% of all electricity produced. China already boasted the most hydroelectric capacity worldwide, with the Three Gorges Dam assumed to be the largest hydroelectric power station worldwide, with 22.5 GW full capacities. It has been in operation since May 2012.

Since the 12th Five-Year Plan was announced in 2010, improving renewable energy has remained a priority for China. A lot of ambitious goals were set; including 100 GW of grid connected wind capacity and 21 GW of solar capacity by year 2015. In 2013, the targets for solar capacity were revised as high as 35GW to aid domestic adoption and improve the country’s solar generation. The target also included a 420 GW of hydroelectric power and 200 GW of wind energy, 50 GW of solar energy and 30 GW of biomass by year 2020 – some of the highest set goals worldwide. In year 2013, the country’s NationalEnergy Administration reaffirmed these goals, reiterating that China was on course to achieve or exceed those targets.[2]

To ascertain its targets are achieved, China has instilled various policy tools. Competitive auctions have been used to decide energy tariffs for both wind and solar energy projects. Feed-in-tariffs (FIT) have also been created for onshore wind, biomass and waste energy, and solar projects.

China offered capex subsidies for residential solar installations via the 2009 Golden Sun Program, driving the rooftop PV market. On October 29, 2013, the country’s NationalEnergy Administration passed a “solicitation letter of photovoltaic power construction scale in 2013 and 2014” that desires the sum total PV installation capacity to attain 12GW in 2014, with 8 GW of distributed PV projects and 4GW of utility scale projects.[3]

China is likewise mulling over a renewable energy system quota likened to a renewable energy portfolio standard. This method would create renewable energy targets for the top 14 power companies in China which represents about two-thirds of the energymarket and the four grid operators. If such a system is used, noting ways to engage these firms will be highlyimportant for the UnitedStates renewable energy exporters, as these could be potential buyers of clean energy sources for the possible future.

Key Metrics

Metrics

Value

Explanation

Base Year

2016

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Top Market Opportunities

Encouraging renewable energy generation has been a priority for China since the 12th Five-Year Plan was announced in 2010. The plan created a number of ambitious targets, including 100 GW of grid-connected wind capacity and 21 GW of solar capacity by 2015. In early 2013, the solar capacity target was revised upwards to 35GW to boost domestic adoption and aid China’s solar industry. The plan also called for 420 GW of hydropower and 200 GW of wind, 50 GW of solar and 30 GW of biomass and waste-to-energy by 2020 – some of the highest targets in the world. In 2013, China’s National Energy Administration reaffirmed these targets, announcing that China was on pace to meet or exceed each mandate.

Solar

China is currently recognized as the largest producer of solar technologies and is quickly becoming the largest consumer as well. The surge in local demand has been facilitated by the Chinese Government and has left only few opportunities for exporters relative to the market as a whole. For instance under the Golden Sun Program, the Government not only provided incentives to consumers, but also selected the module supplier through a centralized process in which no U.S. supplier till date has ever won a contract.[4]

Companies are most times encouraged to consider whether China is the right market for them, as other markets may be easier to penetrate and hold the potential for stronger export competitiveness.

Wind

No market is expected to support as many wind exports as China has. China’s vast market and an unprecedented investment in the sector should support considerable exports from various leading countries. As China shifts its focus to small- and medium-sized wind farms, increased safety and technical standards, and newer technologies, the demand for innovative products and technical components may provide new opportunities for exporters. Many older Chinese wind farms, for example, frequent operational problems and low capacity factors. Demand for higher-efficiency retrofits will likely increase as a result of it.

Hydro power

China also has the largest hydropower resource in the world and the largest pipeline of projects, totaling 80 GW of expected capacity. Exporters may find opportunities in the engineering, design, and development of hydro power projects in China. However, Almost the entire Chinese market is expected to be captured by Chinese firms.[5]

Biomass

There has been a forecast that there will be further increase in demand for biogas recovery and utilization technologies, creating avenue for a potential export opportunity for export firms with anaerobic digestion or gas purification technology. Ambitious targets for biomass production has been set by China, including 2 GW of biogas installed capacity and 3 GW of waste-to-energy by 2015.[6]

Additionally, there are various signs that China is interested in transitioning some of its coal fired power plants towards biomass co-firing – all of which should automatically create some opportunity for feed stock exporters in the near-term.

Industry Challenges

China is still in the process of recovering from vast oversupply in its wind and solar markets (the size of its domestic manufacturing base has contributed greatly to the oversupply of these technologies worldwide). As a result of these, Chinese industry has entered an era of intense restructuring. Suntech, the biggest Chinese solar company, filed for bankruptcy in March 2013 despite receiving billions in direct loans from the Chinese Government. ITA expects mergers and acquisitions within China to continue over the next few years, as demand for products slowly reaches the availability of supply.

In a bid to counter the oversupply of wind and solar capacity, China has moved forcefully to promote domestic consumption and to protect its domestic manufacturers from foreign or external competition, causing trade tensions to rise in Europe and the UnitedStates. The litigious environment created by these cases has further affected the ability of suppliers to do business in China.

Additionally, the lack of inadequate protection and enforcement of intellectual property rights in China remains a consistent barrier for a lot of exporters. It is advisable for small- and medium-sized firms, should be cautious when exporting to China, making sure that they have the proper legal protections and strategy in place before venturing into the market.

In the renewable fuels industry, China restricts ethanol imports in place of fuel and maintains state ownership over its existing ethanol plants.